Meet the taxi industry's last, best hope to survive Uber age

It's called Arro, and it may be the traditional taxi industry's best shot at survival in the age of Uber.

Eighteen months in the making, the new smartphone application allows users to hail and pay for yellow and green taxi rides in New York City, essentially mirroring a service that Uber already provides called UberT. But Arro's designers claim their app is faster, cheaper and more reliable than Uber's.

They hope Arro, which is being beta-tested in 7,000 cabs and will launch publicly in a couple of weeks, will eventually be compatible with all 20,000 yellow and green taxis in New York. Its backers say it contains several features that will give it a competitive advantage over Uber, the $50 billion San Francisco-based tech giant that has upended the taxi industry in New York and other cities around the world.

"We thought that there was a void in the taxi industry, certainly in New York and in other big cities," said Mike Epley, director of product management at Arro. "We see the demand, both on the driver side and on the passenger side. And we want to fill that."

Other apps have tried—and failed—to compete with Uber. Arro said it stands the best chance yet thanks to a partnership with Long Island City-based Creative Mobile Technologies, which controls the payment systems and video screens in about half of the city's 13,000-plus yellow taxis. This allows Arro users to hail cabs through messages sent directly to drivers through CMT's data terminals in the front of cabs. Uber drivers, by comparison, accept e-hails through smartphones mounted on their dashboards.

When a user taps the app, a nearby cab driver is sent the passenger's name, the pickup address and cross streets. The rider is sent the driver's name and ID number so she can identify the car. Users save their credit card information in the app, allowing them to pay the metered fare—plus tip—automatically.

"Our solution is integrated with the taxi, whereas Uber's is not," said Mr. Epley, who worked as a logistics consultant for CMT before leaving to launch Arro.

That leads to the next feature that Arro says gives it a leg up on Uber: no surge pricing, which increases the fare during periods of high demand.

"It's always just the price on the meter," Mr. Epley said. "So it should be more convenient, because the car's closer, and it should be more convenient in the end, because you're already paid and out the door, and there's no separate process."

Mr. Epley said Arro is negotiating with VeriFone Systems, a San Jose, Calif.-based firm that operates payment systems for the other half of the city's yellow and green cab fleet, in the hopes of becoming the go-to e-hail app for city cabs.

"It's a universal e-hail app for all the yellows and greens in New York," he said.

Taxi industry insiders have long complained that the antiquated rules of the city's Taxi and Limousine Commission have suppressed the market for new e-hail apps. The TLC legalized e-hailing in June 2013 and approved rules for yellow-cab apps, as long as they work within the agency's regulations and systems for taxis. A spokesman said that Arro is a participant in the agency's e-hail pilot program and has submitted an application for a license.

Thanks to Uber, the yellow taxi industry is in the throes of an existential crisis. The value of individual medallions has dropped to about $700,000 and perhaps less from its peak of $1.3 million in 2013. The city has declined to auction off a new batch of medallions this year, as insiders watch to see if the market stabilizes. Meanwhile, Uber continues to poach drivers from fleet owners and smaller car-service companies, leaving up to half of taxi garages' vehicles idle at times.

But while Uber dominates the market, regulators are looking for ways to rein in its explosive growth. Over the summer, Mayor Bill de Blasio sparred with Uber, proposing a cap on the number of new vehicles the service could add to its fleet. After several weeks of public-opinion warfare, the mayor backed off his plan, opting instead to study for four months the effects of for-hire vehicles' growth on the industry and traffic congestion.

Meanwhile, Arro is gearing up for its big New York debut, and hopes to eventually launch in other cities like San Francisco, Washington, D.C., Chicago and Boston. The start-up is still small, operating in New York City with just six employees. But Mr. Epley said he is optimistic about the firm's ability to scale up.

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